Kraft swallows Cadbury in multibillion-dollar takeover

Cadbury, a monument to the British chocolate bar, fell on Tuesday to United States giant Kraft by accepting an offer worth £11,5-billion, which creates a world leader in food and confectionery.

The pair announced in a statement that Cadbury management had agreed to a takeover worth 840 pence per share — valuing the group at the equivalent of €13,1-billion or $18,9-billion.

Cadbury-Kraft will provide large cost savings and create a global market leader, with annual sales totalling more than $100-million, they added.

“The board of Kraft Foods is pleased to announce the detailed terms of a recommended final offer for Cadbury and the board of Cadbury unanimously recommends Cadbury security holders to accept the terms,” a statement said.

The takeover will end more than 180 years of history for the colourful maker of Dairy Milk chocolate bars and Trident chewing gum.

News of a friendly takeover also marks the end of months of hostilities over the control of Cadbury, which began life as a small grocer’s shop in Birmingham, central, United Kingdom, in 1824.

Kraft’s previous cash-and-shares offer had valued the iconic British firm at about £10,5-billion.

“Kraft Foods believes a combination with Cadbury will provide the potential for meaningful cost savings and revenue synergies from which Cadbury security holders will benefit,” the statement added.

“Kraft Foods believes a combination represents a strong and complementary strategic fit, creating a global confectionery leader with a portfolio of more than 40 confectionery brands, each with annual sales in excess of $100-million.”

In reaction to the announcement, British Prime Minister Gordon Brown said that his government was determined to help save jobs at Cadbury.

“We are determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained and we are determined that, at a time when people are worried about their jobs, that jobs in Cadbury can be secure,” Brown said at a Downing Street press conference.

Cadbury employs 45 000 staff worldwide, including 5 600 staff at eight factories in Britain and Ireland.

There have been fears about British job losses, with trade union Unite warning Kraft would be saddled with huge debts, leading them to axe 7 000 posts at Cadbury and 20 000 at the company’s subcontractors.

Prior to Tuesday, Cadbury had repeatedly rejected the previous offer from Kraft, arguing that it was “derisory” and had undervalued the London-listed firm.

However, the chocolate firm welcomed news of the improved takeover bid on Tuesday.

“We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world,” said chairperson Roger Carr.

“We will now work with the Kraft Foods’s management to ensure the continued success and growth of the business for the benefit of our customers, consumers and employees.”

Markets were, meanwhile, waiting to see if US chocolate maker Hershey would table its own offer for Cadbury. The Wall Street Journal last Friday reported that Hershey planned to bid at least $17,9-billion this week.

There has also been talk of a possible joint bid for Cadbury from Hershey and Italian chocolate maker Ferrero.

Cadbury, the world’s second-biggest confectionery company behind Mars, also produces chocolate bar brands Crunchie, Fudge, Flake and Wispa.

Dairy Milk is the most popular chocolate bar in Britain — and the company sells more than 250-million bars every year in 33 countries around the world.

Other top-selling brands include Cadbury Creme Eggs, Halls throat lozenges and Milk Tray chocolate boxes.

Kraft, the world’s second-biggest snacks group after Nestle, makes numerous well-known products including Dairylea cheese, Milka and Toblerone chocolate and Oreo cookies.

Kraft had made a £10,2-billion offer for Cadbury back in September 2009.

However, Cadbury, led by American chief executive Todd Stitzer, rejected the bid, saying that it “fundamentally undervalued” the group.

But the US firm has subsequently improved the offer after selling its North American pizza division to Swiss rival Nestle for $3,7-billion.

The Kraft tie-up also faced opposition in Britain with protest from senior ministers over the attempt by a huge American firm to take over a homegrown company. — AFP

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Roland Jackson
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